Dividends are a common form of income for shareholders and investors in Pakistan. When a company earns profit and chooses to distribute a portion of it to its shareholders, this distribution is known as a dividend. However, dividends are not exempt from taxation. In Pakistan, both resident and non-resident shareholders are subject to dividend tax under the Income Tax Ordinance, 2001, which is regularly updated through the Finance Act each year.

This article provides a comprehensive overview of how dividends are taxed in Pakistan, including applicable rates, exemptions, procedural compliance, and regulatory implications for companies and investors.

What is a Dividend?

A dividend is a payment made by a corporation to its shareholders, usually from profits. It can take the form of:

• Cash Dividend: A direct cash payment

• Stock Dividend: Additional shares issued to shareholders

• Interim Dividend: Paid before annual profits are finalized

• Final Dividend: Declared after the financial year’s end by the board and approved in the AGM

Dividends are generally distributed by listed companies, private companies, and mutual funds, and they are subject to withholding tax at source.

Legal Framework for Dividend Tax in Pakistan

The primary law governing dividend tax is the Income Tax Ordinance, 2001, under the following key provisions:

• Section 5: Tax on dividends

• Section 150: Withholding tax on dividend income

• Section 8: Final tax regime applicability

• First & Second Schedule: Contains exemptions and specific rate provisions

• Finance Act: Updates rates and rules each year

Dividend Tax Rates in Pakistan (2024–2025)

1. Cash Dividends from Listed Companies

• General Rate: 15% for filers

• Non-Filers: 30% under section 150

• Mutual Funds: 15% (filers), 30% (non-filers)

2. Dividends from Unlisted/Private Companies

• Filers: 25%

• Non-Filers: 30%

• These companies must deduct the tax at source before distributing the dividend.

3. Dividend Paid by IPPs or REITs

• Independent Power Producers (IPPs): 7.5% for resident companies

• REIT Schemes: Exempt, subject to conditions under the Finance Act

4. Inter-corporate Dividends (Holding/Subsidiary Companies)

• 100% Group Ownership: Exempt under Section 103C

• Less than 100% Ownership: Subject to reduced rate or full tax, depending on structure and SECP conditions

Tax Treatment for Resident vs. Non-Resident Shareholders

1. Resident Shareholders

• Dividend tax is deducted at source by the company.

• This tax is usually considered final tax (Section 8).

• Not subject to further taxation when filing returns.

2. Non-Resident Shareholders

• Subject to withholding tax at standard rates.

• May benefit from Double Taxation Agreements (DTAs) with Pakistan.

• Withholding rates under DTA can be as low as 10% or 15%, depending on the treaty country.

Withholding Tax Procedure under Section 150

Responsibilities of the Company

• Deduct tax at the time of dividend payment

• Deposit the tax within seven days into the government treasury

• File withholding statements (quarterly) using IRIS Portal

• Issue a withholding certificate (CPR) to the shareholder

Failure to deduct or deposit withholding tax may lead to default surcharge, penalties, and disallowance of expenses under section 161/205.

Exemptions from Dividend Tax

Common Exemptions

• Government shareholders receiving dividends from public sector entities

• Mutual funds income distributed to REIT investors (under certain conditions)

• Dividends received by charities and trusts registered under Section 100C

• Dividends from power generation companies established under Power Policy 1994

These exemptions are generally listed in the Second Schedule of the Income Tax Ordinance.

Tax Credit for Dividend Income (Section 62)

Although dividend tax is final, certain shareholders may claim a tax credit under Section 62 of the Income Tax Ordinance for investment in shares of listed companies, provided the shares are held for 24 months. This encourages long-term investment.

Conditions:

• Investment in listed companies only

• Holding period of two years or more

• Maximum credit allowed: Lower of actual investment or 20% of taxable income

Compliance by Companies Paying Dividends

Steps to Ensure Compliance:

1. Board Approval: Approve dividend in board meeting or AGM

2. Filing of Return: File Form 29 if change in directorship/shareholding occurred

3. Withholding Deduction: Deduct applicable WHT rates

4. Deposit WHT: Deposit to FBR within 7 days

5. Update IRIS: Submit online withholding tax statement

6. Payment & Dispatch: Transfer dividends to shareholders’ accounts or send cheques

7. Issue CPR: Share copy of tax certificate with shareholders

FBR frequently audits dividend withholding transactions, especially for large corporates.

Double Taxation Treaties (DTTs)

Pakistan has DTTs with over 65 countries, allowing non-resident investors to benefit from reduced withholding tax on dividends.

Example Rates under DTTs:

To claim benefit, the non-resident must submit a Tax Residency Certificate (TRC) from their home country and file application with FBR.

Dividend Distribution Under Companies Act, 2017

The Companies Act, 2017 governs how dividends are declared and paid.

Key Provisions:

• Dividend must be paid within 15 working days of declaration

• No dividend can be paid if company is in loss

• Interim dividend can be declared by board without AGM

• Unpaid dividends must be deposited to Unclaimed Dividend Account within 15 days

Violation may lead to penalties and personal liability of directors.

Common Compliance Issues in Dividend Taxation

Despite clear laws, many companies and shareholders face challenges:

For Companies:

• Incorrect application of withholding rates

• Delay in depositing WHT

• Non-submission of WHT statements

• Not updating shareholders’ NTN/Filer status

For Investors:

• No tax certificate issued

• Misclassification of filer/non-filer

• Double taxation in home country

• No TRC submission for tax treaty relief

Businesses must consult tax advisors to ensure full compliance and documentation.

Impact on Investment Decisions

Dividend taxation plays a crucial role in investor behavior:

• Higher tax rates discourage income investors

• Final tax regime makes dividend attractive for passive investors

• Availability of DTT benefits encourages FDI in listed companies

• Increased tax on non-filers pushes people toward documentation

A consistent, transparent dividend tax policy fosters a stronger stock market and capital formation.

Government Reforms and Changes (2023–2025)

To enhance compliance and boost investor confidence, the FBR and SECP have introduced:

• Linking dividend payments with bank accounts

• Auto-detection of filer/non-filer status via Active Taxpayer List (ATL)

• Simplified IRIS dashboard for company WHT statements

• Inclusion of REITs and startups in dividend tax reforms

• Encouraging use of Central Depository Company (CDC) for dividend issuance

Comparison with Other Countries

Conclusion

Tax on dividends in Pakistan is a critical element of the broader taxation framework. While it ensures government revenue from profit distributions, it also directly affects investor decisions, corporate payout strategies, and capital market development. Companies must adhere strictly to withholding and reporting procedures, and investors—especially non-residents—must be aware of treaty benefits and filing obligations. With digital reforms and increased enforcement, dividend tax compliance is no longer optional—it’s a necessity.

Tax law in Pakistan forms the backbone of the country’s revenue system. These laws regulate the assessment, collection, and enforcement of taxes and are governed by statutes enacted by the Parliament. Taxation in Pakistan is primarily handled by the Federal Board of Revenue (FBR), with some taxes collected by provincial authorities. Understanding the structure and fundamentals of tax law is essential for individuals, businesses, and consultants operating in Pakistan.

Constitutional Framework of Taxation

The Constitution of Pakistan provides the foundation for taxation through:

• Article 77: No tax can be levied without the approval of the National Assembly.

• Fourth Schedule: It divides the authority between federal and provincial governments.

• Article 70 & 73: Define the legislative process for tax matters.

The federal government is authorized to impose taxes like income tax, sales tax on goods, customs, and excise duty. Provinces levy taxes such as sales tax on services, agricultural income tax, and property tax.

Types of Taxes in Pakistan

Pakistan’s tax system includes direct and indirect taxes:

Direct Taxes

1. Income Tax: Levied on income of individuals, AOPs (Association of Persons), and companies.

2. Capital Gains Tax (CGT): Applied on the gain from the sale of capital assets like securities and property.

3. Withholding Tax (WHT): A system where tax is deducted at source on various payments.

Indirect Taxes

1. Sales Tax: Imposed on the sale of goods and services.

2. Federal Excise Duty (FED): Charged on manufacturing of specific goods and provision of certain services.

3. Customs Duty: Levied on imports and exports.

Key Tax Laws in Pakistan

The primary legislations governing tax in Pakistan include:

• Income Tax Ordinance, 2001

• Sales Tax Act, 1990

• Federal Excise Act, 2005

• Customs Act, 1969

• Provincial Sales Tax Laws

• Tax Administration Reforms

Each of these statutes defines the scope, rates, exemptions, penalties, and procedures for assessment and appeal.

Income Tax in Pakistan

Scope and Applicability

The Income Tax Ordinance, 2001 applies to:

• Residents: Taxed on worldwide income.

• Non-residents: Taxed on Pakistan-source income.

Heads of Income

Income is categorized into five heads:

1. Salary

2. Income from Property

3. Income from Business

4. Capital Gains

5. Income from Other Sources

Tax Year

The tax year in Pakistan starts from 1st July to 30th June of the next calendar year.

Tax Rates

Rates are notified annually in the Finance Act. As of FY 2024–25:

• Individuals: Progressive rates from 2.5% to 35%

• Companies: 29% (general), reduced rates for certain sectors

• AOPs: Slab-based rates similar to individuals

Sales Tax in Pakistan

Overview

Sales Tax Act, 1990 governs sales tax on goods. It is administered by FBR for goods and by provincial authorities for services.

Rate of Sales Tax

• Standard rate: 18%

• Reduced or zero rates apply to specific goods or sectors like exports.

Registration and Filing

Businesses exceeding PKR 10 million turnover must register for sales tax. Monthly returns are to be filed via IRIS portal.

Federal Excise Duty (FED)

Applicability

FED is applicable on:

• Manufacturing of certain goods

• Import of excisable goods

• Provision of specific services like telecom, air travel

Rates and Filing

Rates vary between 5% and 20%. Returns are filed monthly along with payment.

Customs Duty

Governed by Customs Act, 1969

Duties are imposed on:

• Import of raw materials, finished goods, machinery

• Export of certain goods

Categories

• Regulatory Duty

• Additional Customs Duty

• Anti-dumping and Countervailing Duty

Customs are collected at ports and border entry points by Pakistan Customs.

Provincial Taxes

Following the 18th Amendment, provinces now levy taxes like:

• Sales Tax on Services

• Agricultural Income Tax

• Property Tax

• Motor Vehicle Tax

• Professional Tax

Each province has its own Revenue Authority (e.g., PRA, SRB, KPRA, BRA).

Withholding Tax Regime

Importance

Withholding tax is a major source of revenue. Tax is deducted at source on:

• Salaries

• Contracts

• Rent

• Dividends

• Utility bills

• Cash withdrawals

Key Sections

• Section 149 – Salary

• Section 153 – Services and supplies

• Section 155 – Rent

• Section 231A – Cash withdrawals

These are final or adjustable depending on the nature of transaction and taxpayer status.

Filing of Returns and Compliance

Who Must File

• Salaried individuals earning above PKR 600,000

• Business individuals/AOPs with turnover above PKR 1.2 million

• All companies

• NTN holders (in many cases)

Due Dates

• Individuals/AOPs: 30th September

• Companies: 31st December (with audited accounts)

• Sales Tax Returns: 15th of each month

Late filing results in penalties and default surcharge.

Tax Exemptions and Credits

Tax law provides exemptions and tax credits to promote investment, exports, and social development.

• Exemptions under Second Schedule of ITO, 2001

• Tax credits for:

  • Investment in shares and insurance

  • Donations to approved NGOs

  • Construction of new industrial undertakings

  • Employment generation

Audit and Assessments

Types of Audits

• Random audit

• Parametric audit

• Integrated audit (covering income, sales, and FED)

FBR issues notices under Section 177 or Section 122(5A) for audits or amendment of assessments.

Appeals and Dispute Resolution

Hierarchy

1. Commissioner Appeals

2. Appellate Tribunal

3. High Court

4. Supreme Court

Other dispute mechanisms include Alternative Dispute Resolution Committees (ADRCs) under Section 134A.

Penalties and Prosecutions

Failure to comply with tax obligations can result in:

• Monetary penalties

• Default surcharge

• Prosecution for tax fraud or evasion under Section 192–199 of the Income Tax Ordinance

Digitalization and Tax Reforms

FBR has introduced digital platforms like:

• IRIS for income tax and sales tax returns

• WeBOC for customs operations

• TAS (Tax Asaan App) for mobile access

Ongoing reforms aim to widen the tax base, reduce corruption, and improve ease of doing business.

Common Challenges

• Low Tax Base: Less than 3 million active filers in a population of over 240 million.

• Tax Evasion and Informality: Widespread cash transactions and unregistered businesses.

• Complex Procedures: Cumbersome documentation, frequent changes, and lack of awareness.

• Lack of Enforcement: Weak monitoring and limited capacity of field officers.

Future Outlook

To enhance tax collection, Pakistan is focusing on:

• Broadening the tax base

• Reducing reliance on indirect taxes

• Encouraging voluntary compliance

• Simplifying procedures

• Promoting digitization and e-governance

The Strategic Reform Plan 2025 of FBR is aimed at aligning tax practices with international standards.

Conclusion

Tax law in Pakistan is evolving, complex, and crucial for the country’s fiscal health. A clear understanding of basic laws, tax heads, compliance obligations, and digital platforms is essential for both individuals and businesses. Consulting a qualified tax advisor can help navigate the system efficiently and avoid penalties.

In Pakistan, the Federal Board of Revenue (FBR) maintains and publishes two classifications of taxpayers: the Active Taxpayers List (ATL) and the Non-Active Taxpayers List (Non-ATL). These lists play a crucial role in determining the tax status and privileges of individuals, businesses, and associations in the country.

The Active Taxpayers List (ATL) is updated weekly and includes the names and NTN/CNICs of taxpayers who have fulfilled their tax filing obligations for the latest tax year. The ATL status determines whether a filer qualifies for reduced withholding tax rates, incentives, and regulatory advantages.

Active Taxpayers List (ATL)

The ATL is a centralized digital record maintained by the FBR that includes individuals and entities who have submitted their income tax returns within the due date or with the payment of a surcharge as allowed under section 182A of the Income Tax Ordinance, 2001.

To be included in the ATL for Tax Year 2024 (effective from March 1, 2025), a taxpayer must:

• File their income tax return for the relevant tax year (2024)

• Pay any applicable tax liabilities

• Submit the return before the deadline or pay the ATL surcharge after the due date

FBR publishes the ATL every Sunday at https://www.fbr.gov.pk

Non-Active Taxpayers List (Non-ATL)

The Non-ATL comprises individuals and entities who failed to comply with their tax filing obligations. This includes those who did not submit their income tax return by the deadline or failed to pay applicable taxes.

A taxpayer will be moved to Non-ATL status if they:

• Do not file their return for the latest tax year

• File after the deadline without paying the ATL surcharge

• Are blacklisted or declared inactive by FBR due to non-compliance

Once in the Non-ATL, the taxpayer loses several tax-related privileges and faces higher tax burdens and scrutiny.

How to Check Your ATL Status

FBR allows any person to verify ATL status online through the following methods:

• Visit the ATL portal at https://iris.fbr.gov.pk/public/txp/ATL

• Select the taxpayer type (Individual, AOP, Company)

• Enter your CNIC or NTN

• Click “Verify” to see whether you’re on the ATL

The ATL can also be checked via the FBR Mobile App and SMS service by sending your CNIC/NTN (without dashes) to 9966.

Benefits of Being an ATL Taxpayer

• Lower Withholding Tax Rates
ATL individuals and businesses enjoy reduced tax deduction rates on various transactions including bank withdrawals, vehicle registration, property purchase, dividend income, and professional services.

• Eligibility for Tax Incentives
Being on the ATL allows access to tax credits, tax rebates, and reliefs under certain sections of the tax law.

• Avoidance of Penalties
Filing timely returns and maintaining ATL status helps avoid penalties under Section 182 of the Income Tax Ordinance.

• Business Credibility
Companies and individuals listed on ATL are perceived as compliant and trustworthy by banks, suppliers, and government agencies.

• Access to Contracts and Tenders
Many government and private tenders require bidders to be ATL-compliant to qualify for procurement processes.

• Ease of Refund Claims and Tax Audits
Being on ATL ensures faster processing of tax refunds and fewer chances of being selected for audit.

Drawbacks of Being a Non-ATL Taxpayer

• Higher Withholding Tax Rates
Non-ATL taxpayers are subject to significantly higher rates on banking transactions, imports, property transfers, and professional payments.

For example:

• Cash withdrawals above Rs. 50,000 attract 0.6% tax for Non-ATL vs. 0.3% for ATL

• Sale or purchase of immovable property attracts double the tax for Non-ATL persons

• No Access to Tax Refunds and Credits
Non-filers are not eligible for various tax rebates, credits, or refund claims.

• Ineligibility for Government Contracts
Most public sector procurement departments now require bidders to be ATL compliant.

• Increased Risk of Penalties and Notices
Non-ATL individuals are more likely to face scrutiny, fines, or legal notices for non-compliance or evasion.

• Reduced Business and Financial Credibility
Banks, investors, and vendors often prefer working with compliant taxpayers who appear on the ATL.

How to Get Included in the ATL

If you are not on the ATL and want to be included, follow these steps:

1. File your income tax return for the latest tax year through the IRIS portal

2. If the deadline has passed, pay the ATL surcharge as per SRO 1891(I)/2022

   • Rs. 1,000 for individuals

   • Rs. 10,000 for AOPs

   • Rs. 20,000 for companies

3. Ensure the return is complete with wealth statement (if required)

4. Your name will be added to the next ATL update after submission

ATL Validity and Updates

• The ATL is valid for one year, beginning March 1 of the following year after the filing deadline

• For example, ATL for Tax Year 2024 is effective from March 1, 2025, to February 28, 2026

• FBR updates the list weekly to include new compliant taxpayers and remove those who default

Importance in the Digital Economy

With the government’s digitalization efforts, ATL status is now directly integrated with:

• Banks and financial institutions

• NADRA and property registration authorities

• Excise and Taxation Departments

• Corporate portals and SECP databases

Maintaining ATL status ensures uninterrupted access to financial, legal, and business services.

In Punjab, vehicle-related taxes are administered by the Excise, Taxation and Narcotics Control Department under the Motor Vehicle Ordinance, 1965 and the Motor Vehicle Tax Act, 1958. These taxes generate significant revenue for the provincial government and include token tax, withholding tax, professional tax, and capital value tax (CVT). Vehicle tax obligations differ based on engine capacity, ownership status, and whether the taxpayer is on the FBR Active Taxpayer List (ATL).

Methods of Payment

• Online via ePay Punjab App or FBR’s e-portal

• Designated bank branches using printed challans

• Excise and Taxation Offices across Punjab

Token Tax (Motor Vehicle Tax – MVT) and Professional Tax

Capital Value Tax (CVT) on Motor Vehicles

• Imposed on vehicles with engine capacity above 1300cc

• Tax rate: 1% of the vehicle’s value (as per Excise’s valuation tables)

• Tax Period: 5 years from the fiscal year of first registration

• Depreciation: Annual deduction of 10% in vehicle value

• Exemption: After 6 years, no CVT is applicable

Withholding Tax on Vehicle Registration (Effective FY 2025)

Applies at the time of first registration or transfer of ownership. Rates vary based on engine size and taxpayer status.

Important Notes

• Filing status as Filer or Non-Filer significantly affects tax liabilities

• Registration or transfer of vehicles cannot proceed unless taxes are paid

• Withholding tax paid at registration is adjustable against annual income tax liability

• Non-filers also face restrictions on purchasing certain categories of vehicles

In Pakistan, partnerships are governed under the Partnership Act, 1932 and taxed under the Income Tax Ordinance, 2001. For taxation purposes, all partnerships—whether registered or unregistered—are classified as Associations of Persons (AOPs). The taxation of AOPs depends on the nature of income, total taxable income, and compliance status with the Federal Board of Revenue (FBR).

Types of Partnerships in Pakistan

General Partnership
This is the most common form of partnership in Pakistan, where all partners are personally liable for business obligations. Each partner shares in the profits and losses of the firm either equally or according to an agreed ratio.

Limited Partnership
This structure includes both general and limited partners. Limited partners contribute capital and share profits but are not involved in daily operations and are only liable up to their capital investment.

Taxation Structure for Partnerships (AOPs)

Income from Business or Profession
AOPs are taxed on their net business income as per the progressive tax slabs notified by FBR each year. For Tax Year 2025, the latest income slabs are:

• Up to PKR 400,000 – 0%

• PKR 400,001 to 600,000 – 5% of the amount exceeding PKR 400,000

• PKR 600,001 to 1,200,000 – PKR 10,000 + 10% of the amount exceeding PKR 600,000

• PKR 1,200,001 to 2,400,000 – PKR 70,000 + 15% of the amount exceeding PKR 1,200,000

• PKR 2,400,001 to 3,000,000 – PKR 250,000 + 20% of the amount exceeding PKR 2,400,000

• PKR 3,000,001 to 4,000,000 – PKR 370,000 + 25% of the amount exceeding PKR 3,000,000

• Above PKR 4,000,000 – PKR 620,000 + 30% of the amount exceeding PKR 4,000,000

Capital Gains
Short-term capital gains on securities (held less than one year) are taxed at 15% to 20%
Long-term gains (held more than one year) are taxed at 0% to 15% depending on holding period
Capital gains on immovable property may also be taxed under separate slabs defined by FBR

Rental Income
Rental income earned by AOPs is taxed separately at progressive slab rates ranging from 15% to 30%, based on total rental income in a tax year

Dividend Income
Dividend income received by the partnership is taxed at 15% for ATL (Active Taxpayers) and 30% for non-ATL members

Profit on Debt
Income from profit on bank deposits and debt instruments is taxed at 15% (ATL) or 30% (non-ATL)

Other Applicable Taxes on Partnerships

Sales Tax
If the partnership is involved in the sale of goods or taxable services, it must be registered for sales tax. The general sales tax rate is 18% under the Sales Tax Act, 1990

Federal Excise Duty (FED)
Applicable only if the partnership is engaged in manufacturing or providing excisable goods or services

Withholding Tax (WHT)
AOPs are required to deduct and deposit withholding tax under various sections such as payments to contractors, rent, and salaries

Advance Tax Under Section 147
All AOPs with taxable income must pay advance tax on a quarterly basis

Minimum Tax Under Section 113
If an AOP reports a loss or low taxable income, a minimum tax of 1.25% of turnover is applied (subject to exceptions and thresholds)

Partnership Registration and Tax Compliance

• Choose a business name and check availability with the Registrar of Firms

• Draft a Partnership Deed detailing profit-sharing ratios, roles, and capital contributions

• Register the firm with the Registrar of Firms under the applicable provincial law

• Obtain National Tax Numbers (NTNs) for both the firm and its partners from FBR

• Register for Sales Tax if applicable

• File annual income tax return and wealth statement through IRIS system

• Register with Social Security (PESSI) and Employees’ Old-Age Benefits Institution (EOBI) if employing staff

Custom duty in Pakistan is a form of indirect tax levied on goods imported into the country. It is regulated by the Federal Board of Revenue (FBR) under the provisions of the Pakistan Customs Act, 1969 and is enforced through the Pakistan Customs Tariff (PCT). The main objective of custom duty is to generate revenue, protect domestic industries, encourage local manufacturing, and control the flow of goods into the country.

As of 2025, Pakistan’s custom duty framework continues to evolve based on international trade agreements, local economic needs, and budgetary goals. Here is an updated overview of the structure, types, and applicability of custom duties on imports.

Purpose of Custom Duty in Pakistan

• Revenue Generation: A significant source of government revenue.

• Trade Regulation: Helps control the quantity and quality of imports.

• Domestic Protection: Shields local industries from excessive foreign competition.

• Balance of Payments Control: Reduces trade deficits by discouraging excessive imports.

Types of Custom Duties on Imports in Pakistan (2025)

1. Basic Customs Duty (BCD):

   • This is the standard import duty applicable on almost all goods.

   • Rates typically range from 0% to 35%, depending on the nature of goods and their HS (Harmonized System) code.

   • Specified in the First Schedule of the Pakistan Customs Tariff (PCT).

2. Additional Customs Duty (ACD):

   • Imposed under Section 18(3) of the Customs Act.

   • Usually applied on top of the BCD for selected items, especially luxury or non-essential imports.

   • The standard rate ranges from 2% to 7%, although certain items may be subject to higher rates.

   • Notified through Statutory Regulatory Orders (SROs) and budgetary laws.

3. Regulatory Duty (RD):

   • Levied to control the import of specific goods, especially to discourage non-essential or harmful imports.

   • Frequently used as a policy tool to stabilize foreign exchange reserves.

   • RD can range from 5% to 100% depending on the product type.

   • Applied via SROs issued by the FBR and revised periodically.

4. Sales Tax on Imports:

   • Standard 18% Sales Tax applies to most imported goods.

   • Collected at the import stage under the Sales Tax Act, 1990.

   • Exemptions or reduced rates may apply for essential items, raw materials, and PCT-based incentives.

5. Federal Excise Duty (FED):

   • Applied on specific categories of goods such as tobacco products, beverages, motor vehicles, and luxury goods.

   • Varies depending on product type – can be a percentage or fixed amount per unit.

   • Also applicable on selected imported services.

6. Customs Valuation Duty:

   • Duties are calculated based on the assessable value of goods, which is determined under the Valuation Rules, 2000 using:
     • Transaction value method
     • Identical/similar goods method
     • Deductive or computed value method

7. Advance Income Tax on Imports:

   • Collected at import stage under Section 148 of the Income Tax Ordinance, 2001.

   • Treated as advance tax adjustable against the taxpayer’s annual income tax liability.

   • Rates vary based on the importer’s status (ATL vs. Non-ATL) and product category.

Key Influencing Factors for Custom Duties

• Nature and HS Code of Goods:

• Each product is assigned a tariff code that determines applicable rates.

• Trade Agreements and FTAs:

• Pakistan’s Free Trade Agreements (FTAs) and Preferential Trade Agreements (PTAs) with countries like China, Malaysia, Sri Lanka, and members of SAFTA provide concessional or zero-duty access to specific goods.

• Importer’s Profile:

• Active Taxpayers (on the ATL) enjoy lower rates for Advance Income Tax and sometimes preferential treatment.

• Government Budget and SROs:

• Duties and exemptions are frequently revised through annual Finance Acts and SROs, so businesses must stay updated.

How to Check Applicable Custom Duty?

Importers can verify applicable duties using the following tools:

• Pakistan Customs Tariff (PCT) available on www.fbr.gov.pk

• WeBOC Portal (Web-Based One Customs) for automated import declarations

• FBR Valuation Rulings for updated price assessments

• SROs (Statutory Regulatory Orders) for special exemptions and duties

Penalties and Non-Compliance

Failure to comply with customs regulations may result in:

• Confiscation of goods

• Heavy penalties or fines

• Suspension of WeBOC access

• Blacklisting from import activities